While inflation in Australia might have headed down in the March quarter, it is still flying uncomfortably high at 7%.
We've all witnessed first-hand over the past year that excessive inflation triggers interest rate rises, and therefore economic slowdowns and a depreciation in ASX share prices.
Many frightened punters have pulled out of the share market in recent times for that reason.
However, Fairmont Equities dealers' assistant Lauren Hua reminds investors that holding cash is a far worse option during high inflation.
"Cash would not be the optimal asset class to hold in a high inflationary environment as inflation is rising faster than the interest that you earn on your cash," Hua said on the Fairmont blog.
"Stocks would be a much better choice."
She added that many companies would see their revenue and earnings grow at or above inflation.
"Some companies are able to pass rising costs to the consumer to maintain their profit margin."
Things people just can't live without
So which ASX shares are the best ones to have in the portfolio while inflation is raging like a bushfire?
Hua suggested four sectors that investors should take a look at.
First is healthcare.
"Defensive stock such as healthcare are considered safer investments as people will always need healthcare, even when consumer budgets are tight."
High inflation prompts investors to pull their money out of higher risk industries to move into sectors they know will have resilient demand.
"Just like groceries in a supermarket, people will always need medicine and medical treatment," said Hua.
"Consumers will place priority in spending on healthcare as opposed to less crucial goods and services."
Along the same lines, ASX shares representing utility companies could also be a prudent shelter.
"Demand in utility companies will still be strong even in high inflation periods."
According to Hua, utility providers have the awesome advantage of charging pretty much whatever they like.
"When operating costs rise for energy companies, they will pass these higher costs onto consumers and maintain their profit margin," she said.
"Consumers will have no choice but to pay this inflated cost if they want to continue to receive utilities."
'People will still buy bread and milk'
Hua suggested that ASX shares in the consumer staples sector are not a bad batch to consider when the consumer price index is lofty.
Again, those companies are producing goods that Australians can't live without.
"When there is high inflation, companies will pass these costs onto the consumers," she said.
"People will still buy bread and milk, even if the costs increase. Companies in consumer staples know that even if they increase the price of a good, consumers will still need to buy it."
The other side of the coin is that investors should avoid ASX businesses that produce discretionary goods.
"Consumers will stay away from non-essential goods and services such as a new TV or a new car. They will only spend what is necessary if their budget is stretched."
Finally, Hua reckons the energy sector is ripe for picking during times like these.
That's because there is a correlation between the oil price and inflation.
"Energy costs in households would be included in the consumer price index," she said.
"As the oil prices increases, this directly affects the energy costs spent by consumers. This would lead to an increase in the CPI index and then inflation."
